The things you post on the Internet are forever

April 19, 2015 § 52 Comments

I’ve been banned from the W4 thread on fractional reserve banking now, so to the relief of many I can get back to my blogging vacation.  But for the record, I’ve preserved my two (additional) comments which were deleted. I leave interpretation of events in the thread to readers.  I have all versions of the thread saved (up to the point of being banned) to prevent the “memory hole” effect, in case the thread is further “edited”, mainly because I wanted to preserve what I actually said.  I’ll just post the full unedited thread somewhere here if more bits of it start disappearing there.

While the combative stuff may be amusing in a juvenile sort of way, the thread does contain quite a few comments from me explaining my perspective on fiat money, inflation, fractional reserve banking, and the like. So if you find those subjects of interest you might want to check it out.

Here are the two deleted comments, for the record:


Lydia:

As always I say things as I really see them, and don’t much care how that strikes other people. Some people love it, others hate it, some love it when I agree with them and hate it when I don’t, and many attribute all sorts of things to me that I did not say; and I am willing to let the chips fall where they may. But what you see when you read my words is my actual thoughts expressed as clearly as my capacities allow. If someone else wants to package these concepts up in a way that modern entitled morally bankrupt people find less offensive, I’ll leave that to those with a more ‘pastoral’ bent.

And it isn’t exactly a new theme for me that people need to take a hard look at themselves and own their own choices, rather than blaming society or the government for the consequences of their free acts.


Tony:

The government has no special obligation to look after the welfare of citizens …

It is the government’s play thing to destroy as it wishes – as long as it does not engage in usury!

We should play a drinking game where every time Tony puts words in someone else’s mouth, everyone takes a drink. Except we’d all die of alcohol poisoning. Just from his last comment.

Posted by Zippy | April 19, 2015 5:54 PM

§ 52 Responses to The things you post on the Internet are forever

  • Mike T says:

    I can’t say I agree with their decision. I also can’t say I know how true most of what you say about Tony is since my eyes tend to glaze over with TL and DR appearing respectively in each eyeball on many an occasion.

  • Zippy says:

    Mike T:
    The idea that I would find statements like “the federal government has a moral duty to live within its means” objectionable is ridiculous, and people who say such things are really just slandering me. Not that I really care — the point is that it is just an obvious attempt to disqualify me via slander rather than addressing what I’ve actually claimed. I want to kill widows and orphans and torture puppies too, and I am a Big Big Meanie who has no sympathy for the poor and no empathy for poor sex-starved beta males.

    Of course those who govern have a moral duty to govern within the sovereign’s means, protect the common good, etc. I’ve reaffirmed this I don’t know how many times.

    Where disagreement arises is from the fact that people have largely unexamined financial models in their heads (typically based on some notion that the finance of sovereign currency etc is analogous to the personal finance with which they are at least passingly familiar, although as the discussion of FRB and bank deposits demonstrated even that understanding tends to be pretty tenuous) — models about what it means for the federal government to live within its means which “aren’t even wrong”. The sort of accounting required to evaluate the veracity of those models for government finance – unlike in the case of private enterprise – does not even exist.

    Now, the people making decisions have their own models in their own heads, and maybe what they think they are doing is engaging in deliberately inflationary policies. And perhaps that subjective intention is what you are criticizing. But in my view you give them too much credit if you think that they are even capable of doing the sort of deliberate quasi-scientific manipulation of the economy-as-a-whole that they and you think they are doing: they may well think that they know what they are doing, but so does the Indian medicine man doing the rain dance. This activity is all very reassuring to the tribe, of course. Which can in some cases be a self-fulfilling placebo.

    It is always reassuring to have experts in charge as opposed to dart-throwing monkeys.

    The other component of disagreement is that I don’t reflexively treat inflation – the effects of which on individuals are largely a product of their own choices about what property to buy with their excess wealth if they have any – as the Most Important Priority Ever among the thousands of priorities within the domain of the sovereign’s financial operations. Of course inflation can affect the fortunes of various people negatively. But so can all sorts of other things — many of which could be a consequence of government actions motivated by treating inflation as the Most Important Financial Priority Ever, rather than as one consideration among literally thousands of considerations.

  • Zippy says:

    From the Horgan article, which I think is pertinent to what truly divides opinion on this subject between myself and, well, pretty much everyone:

    Tetlock reports on his long-term study of 284 professional pundits, including academics, government officials and journalists, who comment on politics and related issues in scholarly journals and conferences and via mass media. Over two decades, Tetlock assessed the accuracy of 28,000 predictions by the experts related to wars, elections, economic collapses and other events. In a terrific 2005 review, “Everybody’s An Expert,” New Yorker writer Louis Menand summarizes Tetlock’s conclusions as follows: […] Menand’s review is loaded with gleeful one-liners, including this one: “Human beings who spend their lives studying the state of the world, in other words, are poorer forecasters than dart-throwing monkeys.

  • Ita Scripta Est says:

    That’s what they censored you for? You were wiping the floor there and and they didn’t like it so they censored you for it.

    I’m glad too you swatted away the Austrian red-herring of fractional reserve banking and inflation. Austrianism plays a very useful gatekeeper function for liberalism. Instead of scrutinizing real problems like usury, Austrianism leads people who are dissatisfied with the current political or economic order down dead ends that ultimately ensure some form of liberalism is preserved.

  • Mike T says:

    Zippy,

    When you said that I was as entitled as Sandra Fluke, you lost it with most of the commenters there. It is patently obvious to everyone but you that my view was not “entitled” anymore than expecting law enforcement to try to consistently obey the laws they enforce, foreign policy leaders to not aggress unnecessarily, etc. The idea that simply expecting the government to avoid inflation that it can avoid and thus do its part to not devalue savings is somehow “entitled” is just bullshit. I made it pretty clear to you that your statement lumped in everyone including myself who have a pretty good idea of how the system works, accept it and even accept a degree of natural inflation as inevitable. You consistently, as I said, made a beeline for the most ignorant type of investor and proceeded to beat on him while proclaiming that everyone you were dealing with there was of a kind with him.

    By the way, with regard to one of your comments about government finances, the balance sheets are not the feds’ biggest problem. Management or otherwise. The Federal Rules of Procurement are so byzantine and protective of incumbents and the politically connected that they drive up the cost of government in horrifying ways.

  • Mike T says:

    The idea that I would find statements like “the federal government has a moral duty to live within its means” objectionable is ridiculous, and people who say such things are really just slandering me.

    You left out the part there that included a statement about also avoiding inflationary policies to operate beyond its means. See, when you add that in and then get called out for calling it entitled on the order of Sandra Fluke it suddenly sounds a lot less slanderous and a lot more ridiculous. Even after I clarified about understanding the nature of banking and accepting natural inflation, you still said that if the sovereign negligently or deliberately debases the currency badly it’s entitled thinking to be outraged that they destroyed the value of your savings.

    So yeah, you walked into that trap amico…

  • Zippy says:

    Mike T:

    When you said that I was as entitled as Sandra Fluke …

    Quote me.

    My claim was and is that the entitlement mentality of the Sandra Fluke generation is a direct descendent of the entitlement mentality of previous generations, which view it as a moral outrage if the government doesn’t (magically, under some theory of how the rain dance is supposed to accomplish this) sustain the buying power of people who, by their own free choices, lock their own fortunes to dollars. This same sense of entitlement does not apply to people who make different (and possibly wiser) choices to tie their fortunes to things other than sovereign currency: if those people lose buying power it is on them.

    Those bearing this sense of entitlement don’t exhibit the slightest awareness of their own question begging; but are more than willing to express outrage, break out the torches and pitchforks on its behalf, and have a cow when it is pointed out that their sense of entitlement rests on an attitude which treats evil (the usurious mentality which expects others to bear the burden of preserving your property) as good.

    The idea that simply expecting the government to avoid inflation that it can avoid …

    There you go again, with that cartoon model in your head.

    You left out the part there that included a statement about also avoiding inflationary policies to operate beyond its means.

    There too.

    As has been the case in previous discussions, you appear to be simply unaware of your own background assumptions, despite my multiple efforts to point them out to you. If you were aware of them, you would recognize them as the source of our disagreement and at least acknowledge that that is where substantive disagreement lies.

  • What I’m getting here is that Mike T is making claims that Zippy doesn’t really disagree with; he just thinks that the type of manipulation of the economy they’d require is virtually impossible.

    For example: Mike says the sovereign has a duty not to hike up inflation exponentially to get rich; Zippy responds that “not hiking up inflation” isn’t something one can just do.

    Is this about correct?

  • Zippy says:

    Malcolm:
    That’s close.

    My interlocutors appear to be doing at least three things of which they seem to be completely unaware:

    1) Carrying around in their heads not just a macroeconomic model, but one combined with a model of government finance and the interface between the two, which they believe to be more accurate than dart-throwing monkeys. I have no reason to believe this and many reasons not to: just for example, if this were true the fact that the billionaires club is populated almost entirely by men who understand particular businesses and invest in them long term (either Warren Buffet style, as entrepreneurs or both) is inexplicable. The richest men in the world should overwhelmingly be those who understand this better-than-monkeys top down model and use it to make money.

    2) Under this model in their heads, they assume that it is a straightforward matter to “control inflation”, and that failing to do so is the government “living beyond its means”. Note the assumption that the financial accounting exits to be able to tell when the government is or is not living beyond its means. This kind of financial accounting does not exist — it isn’t that is exists but the government doesn’t do it, it is that it does not exist at all. Translating the tax power into buying power is not the straightforward thing my interlocutors assume, just as one example – heck, I had to explain what bank deposits are and are not in the first thread.

    3) They view the preservation of the wealth of those who – by their own free life choices – have denominated their wealth in dollars as entitled to the preservation of their buying power in dollars, as a top priority, as a burden that everyone who made different property choices should be forced to bear (this is where the usurious entitled mentality comes in) through government policies. If you listen to the rhetoric, it is considered a moral outrage that bread becomes more valuable than dollars over time, and that the government doesn’t Do Things Differently to Make Sure This Doesn’t Happen.

  • Mike T says:

    It appears that the direct comparison there is me reading something that wasn’t there. Mea culpa on that, but this is a good example of where your position breaks down with respect to the rest of what I said. Because I specifically referenced a person who made reasonable investments of some amount in sovereign currency, understood the bank system and did not have usurious intention and you still called it breathtakingly entitled that they should be morally outraged that the state was whittling away at their savings’ value.

    To some extent, we all must maintain a fraction of our wealth in sovereign currency to function even just at tax time. It is not entitled to demand that the state avoid all unnecessary actions which would introduce avoidable inflation. That sort of thing is intimately tied with the state ordinarily engaging in a balanced budget and operating within its means.

    As I pointed out to you, a lot of our inflation comes not from fiat currency in and of itself, but the state utilizing the flexibility of fiat currency to deliberately avoid making hard decisions like slashing entitlements, unemployment and cutting back on foreign wars. In modern America, most of the problem really does come from avoidable public policy that is irresponsible and insane on a variety of levels. This is a polity in which Rand Paul is considered a loony bin because he proposed a bill to stop giving foreign aid when we’re running a deficit. The insanity runs deep, but not necessarily the full breadth of our society.

  • Zippy says:

    Mike T:
    See my previous reply to Malcolm, and try to examine your assumptions.

  • Zippy says:

    I sometimes wonder if apples shouldn’t be stamped with a hard-to-counterfeit version of George Washington’s face and used as the token for sovereign currency. Then we’d have all this outrage about the fact that apples rot, and that the magical government doesn’t make it possible to store them for decades without spoiling.

  • Mike T says:

    2) Under this model in their heads, they assume that it is a straightforward matter to “control inflation”, and that failing to do so is the government “living beyond its means”. Note the assumption that the financial accounting exits to be able to tell when the government is or is not living beyond its means. This kind of financial accounting does not exist — it isn’t that is exists but the government doesn’t do it, it is that it does not exist at all.

    I fail to see how this holds true since reasonable projections can be made about what the government has obligated itself to provide in the way of capital outlays to the public and how big of a deficit it is currently running.

    A large part of the accounting problem the government has comes from the Federal Rules of Procurement. The process is utterly byzantine by design and particularly so on matters related to buying labor. It’s impossible for most federal agencies to simply hire a contractor to do “X specific thing at a firm fixed price or given so many hours” and instead must hire them to perform “Y specific hours over Z period of time to perform very general tasks A, B, C and D as specified in the statement of work.”

  • Mike T says:

    That is to say that the rules of procurement and the operating constraints of the civil service all but preclude the accounting you seek. They’re prior to the possibility of accurate forecasting and preclude it since they provide an astonishing variety of ways things can go wrong from simply planning how much should be allocated to a contract, to awarding work to the right team, to ensuring that some moron in the civil service doesn’t FUBAR the entire thing and leave the main government management team left holding the bag.

  • Zippy says:

    Mike T:
    Yes, I know that you fail to see. Your unexamined assumptions are the wellspring of our disagreement.

  • Mike T says:

    I have yet to see you back up your assumptions about government finances. You make bold proclamations about the state of government accounting, but not a whole lot more.

  • Mike T says:

    Another thing too, much of the government simply hasn’t invested the resources into accounting ordinarily required of institutions generally. That’s a large part of the reason why the DoD has accounting problems. It’s so distributed that a big picture is really not possible under the current capabilities into which the government has invested.

  • Zippy says:

    When I claim that X does not exist, people who disagree are welcome to show me X to prove me wrong. But I can’t show you not-unicorns.

  • Zippy says:

    I’m happy to give a bit more description of the unicorn which doesn’t exist, if that is helpful.

    Financial accounting for private businesses is grounded in three statements: balance sheet, cash flow, and profit & loss. Understanding these is left as an exercise. But if you leave anything out, you really don’t know what is going on financially. Small business owners often go bankrupt because they fixate on (say) cash flows and think they have more economic capacity than they truly have.

    The property measurement unit for these statements is currency. But it doesn’t have to be (other than for tax purposes). I was talking to an investment banker this morning about an international index (this is a real one which is actually used) measured in Big Macs. This is better than currencies because Big Macs are ubiquitous in the first world and are more independent of politics than currencies.

    Now, the government doesn’t account for its operations in any consistent way, and it isn’t obvious that the same kind of accounting would even apply. But even if we knew what proper accounting statements should look like for the government, which we don’t, we know that the measurement units could not be dollars (sovereign currency). That would be circular rather than grounded in objective reality, like trying to use Google stock as the metric for all of Google’s operations.

    The unicorn doesn’t exist.

  • Zippy says:

    The fact that people who make statements about deficits and national debts do not know what they are talking about is demonstrated by the fact that their statements are denominated in dollars. “The deficit is $X trillion!” is a statement ungrounded in any non-self-referential reality. It is like saying “Company X issues a million new stock options every year!”.

    Well, yeah, but so what? If you can’t figure out what that actually means financially, the statement (while true) tells us nothing about the financial condition of the institution in question. Or the wisdom of the action.

    That isn’t to suggest that denominating statements like that in equivalent Big Macs would solve the problem — it wouldn’t even begin to do so — but the entire mindset which unreflectively believes that it even makes any kind of sense to measure government economic powers and obligations in units of securities issued by that very government, is insane.

    It is all a rain dance. With unicorns. I know that it is comforting to think that gosh, if only someone responsible were making government financial decisions then currency would be stable and unicorns would walk the earth, sprinkling it with fairy dust.

    But as I have been saying all along, the reality is much worse than those sorts of people think.

  • Mike T says:

    Now, the government doesn’t account for its operations in any consistent way, and it isn’t obvious that the same kind of accounting would even apply. But even if we knew what proper accounting statements should look like for the government, which we don’t, we know that the measurement units could not be dollars (sovereign currency). That would be circular rather than grounded in objective reality, like trying to use Google stock as the metric for all of Google’s operations.

    I’m not sure I follow your logic since government property is valued in the economy by market forces denominated in dollars. Its economic activity is likewise denominated in dollars. The paychecks it issues are valued in dollars. Everything the government takes in and gives out are valued in dollars by the public. So while on some high philosophical level this may make sense to you, I just don’t see it at a practical level. If the federal government lost all of its foreign debt customers tomorrow and GSA were to begin a fire sale, its assets would be valued in dollars and sold accordingly.

    $X trillion in deficit is not a meaningless statement if for no other reason than in order to make up for that deficit the government has two methods that don’t result in literal theft: borrow or print money. It may not be as profound as some think, but it is not a meaningless statement since the effect of borrowing or printing money has a real impact on the economy and the government’s finances. Even if the government can’t measure its own finances properly, the inability to measure doesn’t preclude negative effects on them by its actions.

  • Zippy says:

    Hey, I gave it another shot. Keep thinking about it and you’ll probably eventually get it.

    Meanwhile, my blog vacation is in full swing now. Take care.

  • jf13 says:

    re: “if only someone responsible were making government financial decisions then currency would be stable and unicorns would walk the earth, sprinkling it with fairy dust.”

    Therefore, since we don’t have as much fairy dust as we could be having, we have a huge fairy dust deficit.

  • Dear Zippy. At that blog you mentioned in passing your thoughts on the immorality (don’t recall if that was your designation of it) of property taxes.

    I took have always thought that was immoral ( a form of property theft) but I really don ‘t know why; so, can you post a link to what you have written in that so I can discover why I hold such an, apparently, odd idea?

    You are simply smashing, sir and I have forwarded your Usury FAX to “Culture Wars” which has been in the forefront of the war against usury.

    May God richly Bless you

  • Zippy says:

    Greetings MJYC, my two brief arguments that property taxes are intrinsically unjust are here and here. My own assessment is that the second one – that a property tax in fact amounts to a total confiscation of the property carried out in slow motion – is a stronger argument than the first.

  • Thanks, Zippy. You are the best.

    O,and back when I used a different s/n, you, politely, whipped my ass for my inane claims back when I was a gold bug.

    Man o man, did it ever take me a long time to come to the truth on that ideology which is why your reiteration of these important facts are so helpful to those of us who were never learnt economics.

    Repetitio est mater studiorum

  • Zippy says:

    I appreciate that MJYC, and in honor of your repetitio I’ll take one last crack at explaining what I am saying upthread, in a slightly different way, in the hope that this might help someone who is still unsure to see what I am saying.

    Suppose Google issues new stock[*] every year to buy up startup companies, and an investor wants to evaluate whether this is a good choice financially or a bad choice.

    An unsophisticated investor might think that Google’s stock price – the number of Big Macs you can buy with a share of Google – provides information on the financial health of Google and gives some indication of whether running this ‘stock deficit’ at these levels is a wise choice.

    But it doesn’t. (Well, it does, but only indirectly, and in a way which does not apply to government deficits).

    Google’s stock price doesn’t directly reflect the financial health of Google: it reflects the market’s evaluation of Google’s financial health. It reflects what the tribe thinks of Google’s financial health, but it does not provide any information about the veracity of the tribe’s evaluation.

    Now, the tribe’s opinion in this case has further ‘meat’ behind it, because Google’s financial statements exist, rest on well-established accounting principles for private entities, and reflect the underlying reality of Google’s powers (assets) and obligations (liabilities).

    None of this is the case when it come to the government. The government issues currency or options against it (e.g. T-bills), and the tribe makes its evaluation. But the tribal evaluation is not based on any concrete objective financial understanding of government operations (which does not exist): it is pure, raging, uninformed human political opinion, resting almost entirely on incomprehension of what is really taking place — because the tools necessary to evaluate what is really taking place don’t even exist conceptually.

    It is based on the tribal belief (or not) that the medicine man can produce rain. So managing inflation is just as possible (or not) as controlling the tribal belief in the medicine man’s power to bring rain.

    [*] It is true that corporate stock is merely an analogy to securities issued by the sovereign in the form of currency, options against currency, etc. It is a strong analogy; I could have made it stronger at the expense of perspicuity to everyman. What changes from the privately-issued security to the sovereign-issued security is the underlying assets/powers behind the security. In the case of non-voting Google common shares (GOOG) the security is backed by liquidation rights: the right to any assets of Google left over after all other balance sheet liabilities have been satisfied. In the case of sovereign currency (e.g. US dollars), the security is backed by the sovereign’s pledge to accept it to settle taxes and other debts arising through the legal system (from government actions), and the requirement to measure those liabilities in units of sovereign currency.

    Sovereign currency is used (rather than e.g. Google stock) ubiquitously as the measure of private transactions not because it is illegal to trade a car for Google stock, but because when you do so the taxes have to be assessed in sovereign currency anyway – so it is easier just to first exchange the Google stock for currency (or the even more convenient zero-strike perpetual option for currency against a commercial bank’s balance sheet, which, because it is a zero-strike perpetual option against a strong property base, is valued 1:1 with currency almost all the time — a check written against your checking account) and do the car purchase in dollars.

    A starting place – and it would only be a starting place in one small corner of the puzzle – for developing a financial accounting methodology which could concretely track the government’s powers (assets), obligations (liabilities), resource flows, and increase/decrease in these things would have to take into consideration all of these ‘interface points’ where the tax power and other legal action touches the real economy: where the sovereign pledges to accept and requires the use of his own securities for settlement of debts. And the ‘internal’ measurement unit for such a methodology could not possibly be a security issued by the sovereign himself without degenerating into meaningless self-reference.

    This work – even the conceptual part of it – isn’t even on anyone’s radar, as far as I know. And folks spouting off as if they were more expert than dart-throwing monkeys have no basis for their claims about sovereign finance without this work being, not only conceptualized, but completed, and then actually used to track government finances.

    On another note, one gopher which has popped up several times is the unremarkable fact that the sovereign will accept checks and electronic transfers in lieu of cash for payment of taxes. This is entirely unremarkable, because all that has occurred is that the sovereign has permitted the bank to assume your tax liabilities on your behalf for the sake of convenience (or, more formally, liquidity). Once the check clears you are personally off the hook: but the bank still has the liability on its balance sheet until it settles with the sovereign.

  • Kevin Nowell says:

    Zippy, thank you so much for these posts. I have learned a lot from you and I completely agree with you now on everything you have wrote against usury and on the nature of money, inflation, fractional reserve banking et al.

    I know you are trying to get away from the internet debate; but, I would like to try to convince you that property taxes are not unjust, or at least provoke you into convincing me that they are.

    In your first post, you make the argument property taxes are taxes on any potential sale of the property. This does not seem to be the case to me. Their is an actual service that the government is rendering to the property owner: protection against theft, vandalism and destruction. This service is extremely valuable and the cost of providing this service is partly dependent on the value of the property. A large, valuable home will be more likely to attract burglars, vandals, and criminals of all sorts. Since there is the cost to the government increases as the amount or value of the property increases, it is only right that the beneficiary pays more as he receives more service rendered.

    A close analogue to this relationship is the insurance industry. A property owner pays to the insurance company a premium based in part on the value of the property in question, in return for the insurance company’s promise to reimburse him after a loss. Similarly, a property owner pays to the government a tax based on the value of the property, in return for the government’s promise to respond to any threats against his property and to prosecute any violators of his property rights. If the property tax is unjust then so, too, is the insurance contract.

  • Zippy says:

    Kevin Nowell:
    I think my second argument is stronger than my first one: once the premise is granted, the rest follows quite rigorously. But you state well a counterargument which, while it does not address the second argument directly, does lead one to believe that there is an unspoken flawed premise in one or the other:

    Their is an actual service that the government is rendering to the property owner: protection against theft, vandalism and destruction. This service is extremely valuable and the cost of providing this service is partly dependent on the value of the property.

    Now, just because this is true does it does not follow that property taxes specifically are a morally just way for the sovereign to procure the resources to carry out these functions.

    Despite a few centuries of usurious attitudes teaching people otherwise, property always requires constant work just in order to keep entropy from swallowing it up into the void. All actually real property is like a bucket with a hole in the bottom: you have to keep adding water just to maintain the level, let alone to fill it higher.

    This means that a property owner will have to either allow his property to deteriorate to nothing through neglect, or he will need to produce income and purchase additional goods and services in order to maintain his property. And in fact the income required to maintain a more valuable property will be greater than the income required to maintain a less valuable property. Property owners must generally engage in productive work and in commercial transactions – which can be licitly taxed even if property taxes are intrinsically unjust – in order to maintain their property, and the extent to which they do so will be ontologically connected to the value of their property.

    So we could propose that the unspoken flawed premise in the counterargument is that property taxes are the only way that the sovereign can acquire resources to provide the property rights enforcement (police, courts, etc) that he provides. Taxes on commercial transactions can also provide those resources, and will be directly connected to the extent to which the owner and his property ‘interface’ with the community.

    (Mind you, on this subject I am not at the point where I am defending a position as much as exploring conceptual space).

  • Kevin Nowell says:

    Thank you for taking the time to respond to me. I do see a possible objection to the second argument.

    As you state, “property always requires constant work just in order to keep entropy from swallowing it up into the void”. In other words, all property depreciates. In a world occupied by other humans, one of the faces of that threatening entropy is the damage that could be caused by other humans. Providing a service that limits that particular type of damage can be seen as decreasing the rate of depreciation of that property, thereby increasing its net present value. Paying a property tax is just, therefore, if the amount of tax paid does not exceed the increase in the value of that property caused by the government services rendered.

    Let’s imagine a scenario where a person pays 5% property tax on a property for 20 years. While it is true that in 20 years he will have paid the total value of that property in the taxes; but, how much would that property owner have expected to pay to protect his property without government assistance? I imagine that if you count up the amount he would spend on defense resources, time, danger to his person and pay to watchmen/mercenaries/security forces the property tax would sound like a very good deal indeed.

    I have not mentioned it yet; but, of course there are other services that the government provides that further raise the value of the property and further increase the legitimacy of the property tax. The presence of standardized laws surrounding commercial transactions increase the liquidity of property by lower transaction costs which increases the value of held property. Laws limiting environment pollution decrease the risk of pollution damage to one’s property. Providing and maintaining roadways increase the value of one’s property by increasing access to trade networks. These examples, I think, suffice but are not comprehensive.

    Property taxes are not “the only way the sovereign can acquire resources to provide the property rights enforcement”; but, they are one just way. Taxes on commercial transactions are another way; but, they have drawbacks as well. For one thing, a man who does not sell his property still receives the benefit of the protection of that property and thereby unjustly receives a benefit without providing compensation. From an economic perspective, taxes on commercial transactions increase transaction costs, decreasing the surplus value that markets are able to provide. If all government revenues came from taxes on commercial transactions then who would participate in one? This would create great incentive driving people into black markets thereby decreasing order in the polity. Some possible mutually beneficial transactions would be less likely to occur with such high transaction costs.

  • Zippy says:

    Kevin Nowell:
    Well, now this is turning into a whole conversation. Don’t take my neglect of a number of the things you’ve said as a dismissal; but answering all of these things would take work I am not really prepared to put in. Also I am simply going to avoid practical issues like black markets entirely, since they are irrelevant to questions of intrinsic morality.

    I do have a few basic disagreements with a few of your statements, as well as probably a somewhat different perspective. On disagreements, here is an example:

    For one thing, a man who does not sell his property still receives the benefit of the protection of that property and thereby unjustly receives a benefit without providing compensation.

    That is simply not true. He has to generate income and engage in commercial transactions, pay utilities, etc which are (or can licitly be) taxed, in order to maintain his property. If someone in a remote area lives “off the grid” and grows his own food, when seconds count the police will be only hours away. So taxes on income and sales transactions are inherently connected to actual use of resources, while property taxes are not.

    On perspective, the property tax regime has been frequently used by wealthy people to move into an area, drive up home prices (and therefore assessments), and drive out people who have been there for generations but do not have the income required to pay taxes which have escalated because of higher values. This is part of what has given rise to our McMansion neighborhoods with basketball-bouncing servants dribbling in lock step with It (Wrinkle in Time allusion alert). Property taxes are also used – I don’t know the numbers offhand but it is a primary component – to support the abomination of desolation known as the public school system. The reason these things are possible is precisely because of the economic disconnect between property taxes and the owner’s actual use of his property.

  • Zippy says:

    Also, I would suggest that you haven’t really engaged the ‘internals’ of my second argument — what you’ve done is “agree and amplify” that a 100% income tax is not intrinsically unjust. So you are denying one of its explicit premises (as far as I can tell).

  • Kevin Nowell says:

    Also, I would suggest that you haven’t really engaged the ‘internals’ of my second argument — what you’ve done is “agree and amplify” that a 100% income tax is not intrinsically unjust. So you are denying one of its explicit premises (as far as I can tell).

    I am sorry if my objection was unclear. I agree that a 100% income tax is unjust. What I object to in the second argument is the statement that a “2.5% annual property tax will confiscate the entire property over 10 years”.

    Let’s say I have some property worth 10 gold bars to me; but, every year a dragon comes and destroys 1/10 of my property so that 10 years from now my property will be totally ruined. Now suppose you agree to kill the dragon for me in return for a payment of 1 gold bar per year over the next ten years. This, we can both agree, is not unjust.

    This, I think, is a good analogy of what an effective sovereign does.

    For one thing, a man who does not sell his property still receives the benefit of the protection of that property and thereby unjustly receives a benefit without providing compensation.

    That is simply not true. He has to generate income and engage in commercial transactions, pay utilities, etc which are (or can licitly be) taxed, in order to maintain his property. If someone in a remote area lives “off the grid” and grows his own food, when seconds count the police will be only hours away. So taxes on income and sales transactions are inherently connected to actual use of resources, while property taxes are not.

    I disagree. A person who lives “off the grid” as you say still benefits from the presence of a government who enforces laws and punishes criminals. Even if he does not benefit from emergency services because “when seconds count the police will be only hours away”, he still benefits from the fact that, after a burglary or vandalism or other criminal act which damages his property, he can file a grievance with the police and they will investigate and attempt to punish the perpetrator. This is an actual benefit to him. Would it be possible to live well “off the grid” if anarchy held sway and roving bands of criminals roamed the countryside looking for plunder?

    As to your point about perspective, I agree that the phenomenon you mention is a real problem. This perhaps is an argument to change the basis for property taxes from current market value to the value of the property when it came into one’s possession, or some other method; but, I do not think it is an argument against the justness of property taxes in general.

  • Zippy says:

    Well Kevin, as I feared this is really just a gateway into a long conversation, and we are at that early stage where the more we say the less we agree. So I am going to decline to pursue the subject further for the time being. Take care.

  • jf13 says:

    re: “he still benefits from the fact that, after a burglary or vandalism or other criminal act which damages his property, he can file a grievance with the police and they will investigate and attempt to punish the perpetrator.”

    Since the government can own property it *could* generate sufficient revenues with its own properties, for a nicely limited amount of governmental activities.

    That’s not actually my preferred position, but it is easily defendable. But given that property taxes are indeed confiscatory, the relevant question is whether they are justly confiscatory or not. I strongly suspect that the actual answer depends on the actual tax rate and not the existence of the tax.

  • Mike T says:

    In your first post, you make the argument property taxes are taxes on any potential sale of the property. This does not seem to be the case to me. Their is an actual service that the government is rendering to the property owner: protection against theft, vandalism and destruction. This service is extremely valuable and the cost of providing this service is partly dependent on the value of the property. A large, valuable home will be more likely to attract burglars, vandals, and criminals of all sorts. Since there is the cost to the government increases as the amount or value of the property increases, it is only right that the beneficiary pays more as he receives more service rendered.

    As a matter of law, it has been settled that this is not true. The Supreme Court has ruled that there exists no personal right to government protection, so in a real legal sense the government is not providing you any service. I benefit from my neighbor’s automatic sprinkler system because our yards are tiny and his system is aggressive enough that it inadvertently waters about 30-40% of my yard for free. Yet this accident can only be charitably called a service to me since he has no intention of providing it; it’s incidental to his own need to water his yard, the layout of our yard and the fact that the sprinklers are poorly situated for his optimal use. The person living off the grid is to the police and broader community what I and my yard are to my neighbor.

    Furthermore, by your logic, Canada and Mexico should both be paying taxes to the United States because they draw implicit military protection from the US. The Soviets probably would have flowed right across the border into Canada without the threat of our military response during the Cold War.

    But the thing is that Zippy is arguing from a perspective of intrinsic morality. It really doesn’t matter if the government renders you the most super-awesome service mankind has ever imagined; it’s still intrinsically wrong to use property taxes because they entail a full confiscation of the property’s value.

  • vishmehr24 says:

    Mike T,
    If property taxes enntail a full confiscation of the property’s value then why don’t we see it?
    How come people that have been paying property taxes for decades still continue to enjoy their properties and the value of the said properties is still going up.
    In short, where is the confiscation and the people who should have been beggered and bankrupted by the confication?

  • vishmehr24 says:

    Mike T,
    The actual service that a govt provides to the property owner is to define the state of law in which the property ownership even makes sense.
    The state of law includes the court system, the property registering system and also the securing of national borders and securing the internal law and order.
    Anarcho-capitalism is oxymoron. You don’t have any property outside the state of law. The concept “property” does not make any sense in the state of nature.

  • Mike T says:

    How come people that have been paying property taxes for decades still continue to enjoy their properties and the value of the said properties is still going up.

    Your first question is non-sequitor. The cost of house is going up for the same reason the cost of food is going up. The dollar has gotten progressively weaker over the last few decades. In most parts of the country, the “appreciation” of their house is roughly similar to buying a bottle of cheap wine in 1980, seeing the same label go up 300% over 35 years and then talking about making a profit.

    Property taxes usually stay relatively firm irrespective of the drop in the economy. Our rate just went up and I live in one of the richest counties in the United States. The local government is still struggling to get enough revenue. The situation in most municipalities is far worse; my relatives in central North Carolina are seeing a slow, but steady drop in property values and the county just continues to raise the rates in order to keep the same income target.

    The actual service that a govt provides to the property owner is to define the state of law in which the property ownership even makes sense.

    Even if that were a valid excuse for them to tax property ownership, it’s irrelevant to the level of government that actually levies property tax in almost every state. Counties and municipalities don’t write the majority of law that protects life, limb and property. That’s the state. Property tax is primarily the system by which the public school system is funded, not the bedrock funding of the government.

  • Mike T says:

    You don’t have any property outside the state of law. The concept “property” does not make any sense in the state of nature.

    There is no such thing as the “state of nature.” It’s a philosophical construct used for the sake of building an argument, but human beings are acquisitive, political animals by nature. In our most ancient hunter-gatherer tribes, we still had the concept of property and had rudimentary politics (as Zippy defines politics). Appealing to a “state of nature” in politics is like appealing to unicorns when discussing equine matters.

  • Mike T says:

    It’s also true that even if the confiscation of value never reaches 100%, it can still reach unreasonably high levels over the lifetime of the asset.

  • vishmehr24 says:

    If philosophical constructs are to be disparaged, all this discussion will quickly ground to a halt. “State of nature” is a useful construct–sovereigns exist in a state of nature, meaning that there is no superior civil law they are obliged to obey which is precisely the meaning of being a sovereign.

    You are correct that man is a political animal thus man is naturally to be found in a state of law. Anarcho-capitalism (another philosophical construct!) can not exist since a state of law is necessary even to define ownership.

    A man may acquire ownership over an unowned object by mixing his labor with it. But how much labor is required for which type of object?
    Fruits hanging on trees, soil, free-range animals, all the different kinds of objects and the general argument can not tell us the quantum and the kind of labor required to create ownership relation.
    So, this specific information is provided by the customs and rules of the community in which these questions are being raised. That is, the answer can only be given in a rule-bound community i.e. “a state of law”.

    Thus, I do not think Zippy can show that a very specific kind of tax is
    immoral by its very nature, everywhere and in all circumstances.

  • Mike T says:

    Your argument assumes that I actually agree with your concept of how and when someone owns property. In fact, your argument all but reduces property ownership to a social convention that has a very tenuous connection to the natural law and human nature. Custom, tradition and law inform us in specific details, but not in the fundamentals about property claims and ownership.

    So yes, Zippy can show that a specific kind of tax is intrinsically immoral as there are many aspects of property rights that simply are not social conventions to be disposed of as one sees fit for the greater good.

    Taking your own argument literally, a specific tax of 10,000% of a man’s income cannot be said to be intrinsically immoral.

  • vishmehr24 says:

    Labor-mixing is precisely how property ownership is justified in the natural law. Edward Feser has written a nice article linking the natural law and property acquisation.

    As Zippy is not going to offer his theory of property, your position is impregnable. You can easily say “I don’t agree with your premises” but as you offer no premises of your own, further discussion is pointless.

  • jf13 says:

    As is usual with extended Zippy discussions, the biggest disagreements hinge on definitions and metaphysics, essentialism, nominalism, etc. I think we all agree that the *fact* of ownership does not depend upon someone else’s perceptions. A robber, for example, is merely someone who believes the fact of ownership is too-easily changed, for example by physically seizing.

    Government/societal recognition of ownership is a good thing, but that recognition does not *convey* ownership. It conveys title, whose physical emobdiment is merely a piece of evidence of government recognition. And even title itself does not require governmental protection of the “right” to title; it merely means the government would make a nice witness in court.

  • Mark Citadel says:

    Welcome back, Zippy. You never do stop causing mischief. haha. Alas, your perspective on these matters goes missed on that thread. In putting together a kind of Reactionary handbook, I have made it my mission to read through your entire works on usury as well as others to inform a perspective on Golden Age economics.

  • Exfernal says:

    Property owners must generally engage in productive work and in commercial transactions – which can be licitly taxed even if property taxes are intrinsically unjust – in order to maintain their property, and the extent to which they do so will be ontologically connected to the value of their property.

    Zippy, do you propose a direct, proportional relation between the ‘snapshot’ value of a property and the rate of its ‘perishability’?

  • Exfernal says:

    @jf13 (why no longer 12?)

    There is some difference between personal recognition by an individual (a thief, robber, tribal lord, etc.) and societal recognition of property laws. What differentiates between ‘seizures of property’ carried out by raubritters and a sovereign?

  • Exfernal says:

    @Zippy

    And yet income taxes would affect disproportionately severely the most perishable types of property. What else would explain the allure of jewels and precious metals as historically preferred types of ‘value storage’?

  • Zippy says:

    Exfernal,

    As with Kevin Nowell above, it isn’t clear that we share enough common ground to have a short conversation; and at least for the time being, I am not available for a long one.

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